Your Genes Won’t Make You Rich

Research from Sweden suggests that wealth is more about nurture than nature.

Children of rich parents tend to grow up to be rich adults. This general pattern is not disputed, but it’s debated whether nature or nurture matters more — that is, whether a child’s genetics or environment has a larger effect on her economic success (or failure) as an adult.

A new study from Sweden offers an answer: Nurture is more important than nature. By linking data on adopted Swedish children to both their biological and adoptive parents and then tracking the children’s wealth decades later, the researchers found that who raises a child matters more than who gives the kid their DNA.

“Innate biology is only a small factor” in wealth, said Kaveh Majlesi, a professor of economics at Lund University in Sweden. Majlesi is a co-author of the study, “Poor Little Rich Kids? The Determinants of the Intergenerational Transmission of Wealth,” which was released as a working paper (and has not yet been peer-reviewed) with the National Bureau of Economic Research last month. After observing a strong relationship between the wealth of one generation and that of the next, Majlesi and his colleagues sought to answer this question, in his words: “How much of the correlation is innate ability versus how much of it is that you grew up with those specific parents?”

Whether it’s nature or nurture matters immensely for policy. Economic inequality has been rising in advanced economies like Sweden and the United States. And wealth is far less evenly distributed than income, education or other markers of economic success. If children born to rich families are naturally more intelligent or harder-working than those born to less-well-off parents, then something like a “rich gene” might be at work. In this case, policies responding to widening wealth inequality might need rethinking.

But the new working paper found instead that for an adopted child, wealth in adulthood (before receiving any inheritance) is most affected by her adoptive parents’ wealth, not the wealth of her biological parents. This points to the inherent advantages of growing up rich. In other words, this research suggests that there is no “rich gene” or that its impact is overshadowed by environmental factors.

To analyze intergenerational wealth, Majlesi and his co-authors studied 2,519 Swedish children who were adopted between 1950 and 1970. Data from the Swedish registry of adopted children — with details linked to adoptive and biological parents — has spawned many types of research on the nature versus nurture question. The data has been used to explore how voting behavior, crime, education, and entrepreneurship are tied to genetic and environmental forces.

In addition to the adoption registry, Sweden has near-exhaustive administrative data on adults’ net wealth — defined as total assets minus total debt— between 1999 and 2007.1 Tapping this data allowed Majlesi and his co-authors to link the wealth of the adult adoptees to the wealth of both their biological and adoptive parents. (The researchers also looked at a large control group of children raised by their biological parents.)

The biological parents of children given up for adoption tended to be younger, poorer and less-educated than the general population. This was no surprise to the researchers. The biological parents were “negatively selected,” to use the statistical jargon. And, similarly, the adoptive parents were older, wealthier and better-educated (“positively selected”). The researchers were careful to examine the net wealth of both sets of parents at the point when they reached approximately the same age (in their mid- to late 60s) so that the adoptive parents’ wealth wouldn’t be higher merely because they were older.

Of course, part of why rich kids grow up to be rich adults is purely mechanical: Their wealthy parents die and leave them a bequest. The researchers wanted to examine the wealth of adoptees before they received any inheritances, so they looked only at adult adoptees with at least one living parent. In doing so, they found that adoptive parents had 1.7 to 2.4 times more of an effect than the biological parents did on the adopted child’s adult wealth, after controlling for other demographic variables like gender and age. When the researchers looked at adoptees whose parents were dead — those who presumably could have inherited some wealth — their adoptive parents’ wealth was an even stronger predictor.

An important assumption in this analysis is that the adopted children were randomly matched with their adoptive parents. If rich adopting parents somehow adopted only the children of rich biological parents, then the analysis might be skewed. But the effect of adoptive parents’ wealth is just as strong whether or not the biological parents’ wealth is included as a variable. This suggests that the adoption process was truly random — that there was no consistent correlation between the wealth of the two sets of parents.

Whether these results are applicable outside of Sweden is unclear. When I asked Majlesi what this might mean for the U.S., he hesitated to respond. “It is always difficult … always speculative,” he said, to infer what a study might mean out of context. That said, he pointed out that the Swedish government provides free higher education and universal health care to its citizens, whereas the U.S. does not. These benefits presumably blunt the forces of economic inequality in Sweden, while their absence in the U.S. might exacerbate inequality here — making it likely that the trend is even more powerful in the U.S.

“If your parents are that important in Sweden,” Majlesi said, “my guess is that they’re that much more important in the U.S.”

Footnotes

The administrative records on net wealth include all real estate holdings and financial assets (like cash, stocks and bonds), but not retirement accounts. But because the Sweden’s national pension system is so generous and comprehensive in its coverage, the authors argue that it’s fair to leave out private retirement assets from the net wealth tally.

Andrew Flowers writes about economics and sports for FiveThirtyEight. @andrewflowers